{"ok":true,"canonical_url":"https://dealroom.so/glossary/lapse-in-coverage","api_url":"https://dealroom.so/api/public/glossary/lapse-in-coverage","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"lapse-in-coverage","term":"Lapse in Coverage","group":"The loan itself","definition":"This means a period where required insurance policies (like hazard or life insurance) were not in effect. Lenders consider this a serious issue as it exposes the collateral and the loan to uninsured risks.","what_it_means":"The SBA requires various insurance coverages, including hazard insurance on collateral and often key man life insurance for principals, to be continuously in force. A lapse in coverage on existing policies will be a red flag during underwriting. Ensure all required policies are active and properly assigned to the lender at closing to avoid delays or loan conditions.","url":"https://dealroom.so/glossary/lapse-in-coverage","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"},{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"}],"related":[{"slug":"life-insurance","term":"Life insurance","url":"https://dealroom.so/glossary/life-insurance"},{"slug":"key-man-insurance","term":"Key man insurance","url":"https://dealroom.so/glossary/key-man-insurance"},{"slug":"assignment-of-policy-form","term":"Assignment of Policy Form","url":"https://dealroom.so/glossary/assignment-of-policy-form"},{"slug":"collateral","term":"Collateral","url":"https://dealroom.so/glossary/collateral"}],"related_questions":[{"question":"How does the SBA evaluate 'prudent lending standards' in 7(a) loan underwriting regarding debt service coverage?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-evaluate-prudent-lending-standards-in-7-a-loan-underwriting-regarding-deb"},{"question":"How are appropriate business life insurance coverage amounts calculated?","url":"https://dealroom.so/sba-7a/questions/how-are-appropriate-business-life-insurance-coverage-amounts-calculated"},{"question":"What is the typical amount of key-person life insurance coverage needed?","url":"https://dealroom.so/sba-7a/questions/what-is-the-typical-amount-of-key-person-life-insurance-coverage-needed"},{"question":"How is the ideal coverage amount for key-person life insurance typically calculated?","url":"https://dealroom.so/sba-7a/questions/how-is-the-ideal-coverage-amount-for-key-person-life-insurance-typically-calculated"},{"question":"Does the SBA require a specific debt service coverage ratio (DSCR) for approval?","url":"https://dealroom.so/sba-7a/questions/does-the-sba-require-a-specific-debt-service-coverage-ratio-dscr-for-approval"},{"question":"When is a debt service coverage ratio waiver or exception possible for an acquisition?","url":"https://dealroom.so/for-lenders/questions/when-is-a-debt-service-coverage-ratio-waiver-or-exception-possible-for-an-acquisition"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Lapse in Coverage","url":"https://dealroom.so/glossary/lapse-in-coverage","source_type":"DealRoom Data"}}